The uncertain future of cabins in Minnesota

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You know it’s summer in Minnesota when it’s early on a Friday afternoon and northbound traffic on I-35 is backed up out of the Twin Cities and and both ways on I-94. Inside the cars are families, fishing poles, coolers, life jackets and other implements for a weekend at the lake.

There are an estimated 124,000 seasonal home land parcels in Minnesota, according to the Minnesota Department of Revenue, with cabins making up many of the residences in counties like Cook, Aitkin, Cass, Lake of the Woods, Hubbard and Crow Wing.

In the coming decades, baby boomers in the U.S. are expected to transfer an estimated $30 trillion in assets to subsequent generations. For many families in Minnesota, that’ll include the family cabin.

Or will it?

In their early adulthood, millennials have developed a reputation for being more interested in experiences than ownership. They make less money, on average, than their parents did at the same age, and many are saddled with college debt.

Meanwhile, cabins, once little more than a roof over bunk beds — no electricity and no indoor plumbing — are getting more expensive to buy and maintain. What’s more, services like Airbnb and HomeAway have made it easy to rent a cabin for a few days, leaving the maintenance and tax bills to someone else.

Do cabins as we know them have a future in Minnesota?

Aging owners

One thing’s pretty sure: we’re on the precipice of a change in ownership for cabins.

That means the average cabin owner will likely age out of cabin ownership in the next couple decades.

“We are looking at the largest intergenerational transfer of land in the history of the country,” said Jeff Forester, the organization’s executive director. “What happens to that land is going to be significant.”

Many baby boomers opt to move to the cabin full time in retirement. But for an increasing number of families, selling the cabin is a way to pay end-of-life medical bills, Forester says.

For other families, the question is whether the kids and grandkids will want to inherit the property, or, if it goes up for sale, who will want to buy it.

Forester thinks about his family’s cabin, a modest log structure his great-grandfather built on an island. It’s not fancy, he says — it’s got an outhouse — but it’s beautiful. The place has hosted family members, Boy Scout troops and many friends over the years.

He was interested in keeping it up and keeping it in the family, but he’s not sure if the next generation will be. “I don’t know how we’re going to work that out,” he said.

Cabins or lake homes?

Cabins like Forester’s are increasingly rare in much of Minnesota. “What is fairly common now is that aged housing stock is bought, torn down, and because the value of the property is so high, someone will build a correspondingly high-priced home,” said Crow Wing County Administrator Tim Houle.

It’s getting to the point where Houle wouldn’t exactly call the Brainerd lakes area where he lives and works “cabin country.”

“I don’t think that is what we have, and we haven’t had it for 20 or 30 years,” he said. “These are lake homes.”

Department of Revenue figures show the value of seasonal recreational residential homes, i.e. cabins, increasing at an even faster clip than other types of properties from 2000 to 2006. They dropped during the recession, and have since begun to increase, albeit at a slower than pre-recession pace, again.

Estimated market value percent change by property type

This chart shows percent change in the total estimated market value of the tax base in each category. 2017 numbers are preliminary.

Source: Minnesota Department of Revenue

“Over the past few decades, lake properties have greatly increased in value, making them harder and harder for the average person to obtain,” wrote Cameron Henkel, co-founder of LakePlace.com, a lake property real estate brokerage, in an email. Despite becoming more expensive, Henkel doesn’t see the dream of having a lake place going away in future generations.

These days, he said, tight supply means there’s not a lot of places available under $300,000, but the farther you get from metro areas, the more you get for your money.

That varies across the state — with more bigger homes on bigger destination lakes like Gull, Vermilion and Mille Lacs. But with lakeshore property values increasing at a fast clip, the people who can afford to buy lake homes can often afford nice ones. Property taxes for lakeshore properties, likewise, have increased with the value of the homes, making it harder for some to keep up.

That prompts the question: Will millennials, who are currently cash-strapped, even be able to afford second homes like these? If they can, will they even want them?

Ways to make it work

As time goes on, some families struggle to decide who inherits the cabin. Can one sibling or cousin buy the others out? If not, how to handle joint ownership?

Many families handle the transfer of cabin property from generation to generation by putting it in a trust.

When Kelly Asche, a research associate at the Center for Rural Policy and Development, was surveying property owners, he was shocked at how many homes property tax records showed were in trusts.

This enables multiple family owners to have a stake in the property, and reduces the hassle of property transfer by allowing it to skip the probate process, making it more feasible for multiple people to own the property and more affordable to maintain it, with costs spread out.

Asche wonders if that will increase as families look for ways to share the cost of owning a home on the lake.

There’s also the question of home-sharing sites, like Airbnb and HomeAway, which enable people to rent homes on the lake. That’s a departure from the traditional cabin ownership, where the place belongs to a family and generally isn’t in use when they aren’t there, but by allowing owners to raise some cash to cover the mortgage, maintenance and taxes it could make cabin ownership possible for some where it otherwise might not be.

Both Houle and Asche said there are a few houses listed on home sharing sites in their areas, and wonder if that will increase.

Buying a cabin

Conor and Madeline O’Phelan, both in their early 30s, bought a cabin about three years ago, before they even bought a single-family home.

Neither grew up in families that owned cabins, but they wanted a place for their friends to congregate, and for their son to grow up at the lake.

When they were in the market for a lake place, the No. 1 thing was affordability, Conor O’Phelan said. It was more a question of how many bunk beds and pull-out couches they could fit into the place than how many square feet it was.

“We do fine, but we’re not from money by any means,” Conor said.

They purchased a small place in the Hayward, Wisconsin, area from its original owners, who built it in the 1970s.

For some millennials, having experiences might mean spending money on trips instead of property. But O’Phelan puts the cabin in the category of experiences.

“We love to spend time with our friends and family, and having a cabin fit that vibe. We wanted a place that was something that we were regularly going to bring our friends to,” he said. “I think one of the things people have to balance out is what you want to do on the weekends. We like going to the same place.”

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Comments (14)

I’m very thankful I never fell for this cabin scam. One house is enough to take care of. For cabin owners, Thursday night means cut the grass, and get everything packed up and ready for Friday. Friday means hurry home from work, get everything and everyone loaded up and make a futile effort to beat the traffic; good luck with that one. Gotta cut the grass at the lake place Friday night or Saturday. How soon will we leave on Sunday to beat the traffic home? No thanks.

But I count my blessings, because it makes for some quiet holiday weekends here in town.

I used to work with a guy who had a nice thing going. He and his bride lived in a nice senior hi-rise in St. Paul. He’d get home on Friday, take a shower, and head to the Watergate Marina. Five minutes after he locked the door they’d be on their boat for the weekend. Marina gas isn’t cheap, but it’s a lot less than property taxes, and no grass to cut or trim to paint.

We bought our cabin (in Georgia) from my parents 10 years ago. The unique site has now been in the family 42 years and hosts a family reunion every year. It’s not a lake home but it’s a cabin with wood burning stoves, no ac, yet can sleep 18 and more if we move out to the sleeping porch. Yes, the cost and work is real but the peacefulness and beautiful morning views are awesome. Our plan is to work with our 3 young adults over the next 10 years to determine if and how the next generation enjoys this treasure. It could be a sale or a shared arrangement. (Lake rules do not permit rentals.) Our MN attorney has been a blessing in helping us navigate the first purchase and will be a support in the next generation transfer. My advice: Be thoughtful!

Last year, I bought the cabin next to our family cabin north of Virginia. I know exactly the amount of work it is and the issues that there could be with my sons and ownership moving forward. It’s still all worth it.

And, BTW, property taxes on cabins are at the business tax rate, thanks to Jessie.

Since the average cabin owner is 68, has owned their place for more than 20 years, and we can’t even vote when local districts decide to raise the taxes, maybe we are an endangered breed. Both places are very seasonal, and yet the yearly taxes on the family cabin are what my dad paid to build the place in 1965. Even with the time value of money, that’s insane.
As a family, we have paid tens of thousands in taxes over the years for a school district we never have had kids in, for other services we never have used, without a vote.

The locals should accept a lower tax base, and impoverished local services, for the privelege of providing you a vacation destination? I could see a trade off, should folks like yourselves actually patronize the local economy in those locales, but in my experience, those cars and trucks heading north on a Thursday afternoon are loaded with more than clothes and people.

Mr. Anderson, I suspect you drive to your cabin(s) on roads which were built and maintained with tax dollars. If you or any of your family or guests have needed medical care while enjoying your cabin(s) since 1965, I imagine you’ve had that broken wrist set at a local hospital financed by taxes. While you may bring most of your provisions from “home,” you may still do a bit of shopping at Virginia-area stores, whose owners and staff were educated by taxes you’ve paid over the years. If your cabin(s) catch fire and there IS a local fire service, I think your taxes will have gone into supporting that, too.

Unless you’re a hermit in an electricity-free, running-waterless cave unreachable by any road, spurning all services, conveniences and human contact, you are getting a lot back from your taxes. To resent the taxes you pay on your second home as merely educating strangers’ kids is to willfully ignore what taxes actually buy!

When we looked at Google trends (for more general terms) ‘cabin rentals’ vs ‘vacation rentals’ we see that since 2004 ‘vacation rentals’ has had a steady drop in search volume while ‘cabin rentals’ has remained steady and is slightly up from 2004. While the term ‘vacation rental’ has a higher search volume overall, the volume gap has shrunk and will eventually overlap.
We agree that Cabin Time is a vacation experience, not just a destination. It just appeals to a smaller segment of vacationers who seem to be loyal to that experience.

While the cabins may be a local burden, they are a limited national resource, and there are many people from farther away who would be happy to rent a cabin for the summer or a vacation. Part of the issue is the lack of development in towns nearby. Where on the East Coast, you find a plethora of music festivals and other arts activities, Minnesota has almost none of that, nor summer-long music camps and festivals. Look at the impact of Interlochen. While Maine can draw visitors from New York and New England, Minnesota can draw from Illinois and beyond. Having rail service in the summers would also help, if it ran to Brainerd, to Duluth and beyond…
Lakeside cabins are a precious resource.

Thank you Mr. Phelan for clearly articulating why I never bought into this scam when moving here 20 years ago. Add another set of utilities, property taxes, upkeep to it and that cements it for me.

I don’t know whether to laugh or cry when I hear stories about the sibling with the highest (or presumed highest) income buying the “family cabin” from the elderly parents and the rest of the family using it with little or no financial contribution.

Every action has a reaction, and one reaction as cabin/home use and ownership change may be adverse environmental impacts from more intensive cabin or lake home use due to tear down and rebuilt, as well as increased short term use through various rental regimes by people who are not vested in protecting the lakes, preserving near shore water vegetation, maintaining adequate buffers on shore lands to prevent erosion and damage to shore and near shore habitat, failure to maintain or over use and misuse of septic systems, and responsible boating and water use on the lakes.

Our lakes and waters are both personal and public treasures, and we all need to use them responsibly and carefully to maintain water quality and continue to provide habitat for wildlife and vegetation which rely on the waters for their survival.

The problems associated with run-off and building too close to lake shore’s has been well documented. Many cities have been granting variances like candy so these buildings are far too close the lakes with little or no buffers. And the septic systems and berms are problematic as well.

I’m not wealthy enough – or interested enough in flat water – to feel that a “cabin on the lake” is worth any substantial amount of either labor or money. But then, I’m not a native. Maybe if I’d grown up here it would seem more worthwhile.

I’ll note, however, that all three of the states where I’ve lived have a similar syndrome about “getting away,” assuming in each case that you had the financial wherewithal to do so.

In Missouri, the place to be in the summer was Lake of the Ozarks. That may have changed – I haven’t lived in Missouri in 20 ever-more-grateful years – but when I left, a place in the Ozarks was still something that would get you some status among the neighbors.

In Colorado, at least if you lived on the Front Range, where 85% of Colorado’s population resides, the syndrome is a “cabin in the mountains” that, at least psychologically and financially, nearly duplicates the “cabin on the lake” that’s so popular here. These, much like Minnesota’s lake cabins, have evolved into second homes, many/most of which are hardly “cabins” in the sense that most of us would think of when hearing the word, and mountain real estate, even when the slope is 20° or more and you have to drill 500 feet down to get any water at all, is prohibitively expensive.

I was fortunate to grow up with parents who owned a cabin and a mother who had summers off. We spent the whole summer as kids at the cabin and yes, it was idyllic. Fast forward to 1999 when I purchased my lake home knowing what I was getting myself into. Yes, it is a sacrifice as we never went on family road trips because we were tied to the cabin and I told the wife she would have to accept mediocrity in both places, but I wouldn’t trade it for anything. I am fortunate to work a four day work week so Thursday night is the best night of the week. Getting out of the car at the cabin, my blood pressure drops as I hear the sounds of the frogs or loons and smell the trees and damp earth.

I have a list of projects that may never get done but it doesn’t matter because it is my hobby and I don’t ever want to reach the end of the list. We do what we can to protect the lake with maintaining our septic and planting wildflowers as a beautiful buffer. Occasionally, I harbor the idea of imagining what it would be like to be free of the cost and burden of maintaining a second home but then I wake up in a panicked sweat.

I do feel that my millenial children are smart enough not to follow in my footsteps so the day will come when I will have to part with my piece of paradise. But, until then, I will be the one mowing the lawn with a smile on my face….